Correlation Between Africa Oil and Microsoft Corp
Can any of the company-specific risk be diversified away by investing in both Africa Oil and Microsoft Corp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Africa Oil and Microsoft Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Africa Oil Corp and Microsoft Corp CDR, you can compare the effects of market volatilities on Africa Oil and Microsoft Corp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Africa Oil with a short position of Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Oil and Microsoft Corp.
Diversification Opportunities for Africa Oil and Microsoft Corp
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Africa and Microsoft is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Microsoft Corp CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp CDR and Africa Oil is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Africa Oil Corp are associated (or correlated) with Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp CDR has no effect on the direction of Africa Oil i.e., Africa Oil and Microsoft Corp go up and down completely randomly.
Pair Corralation between Africa Oil and Microsoft Corp
Assuming the 90 days trading horizon Africa Oil Corp is expected to under-perform the Microsoft Corp. In addition to that, Africa Oil is 1.55 times more volatile than Microsoft Corp CDR. It trades about -0.01 of its total potential returns per unit of risk. Microsoft Corp CDR is currently generating about 0.08 per unit of volatility. If you would invest 1,863 in Microsoft Corp CDR on September 2, 2024 and sell it today you would earn a total of 1,227 from holding Microsoft Corp CDR or generate 65.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Africa Oil Corp vs. Microsoft Corp CDR
Performance |
| Timeline |
| Africa Oil Corp |
| Microsoft Corp CDR |
Africa Oil and Microsoft Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Africa Oil and Microsoft Corp
The main advantage of trading using opposite Africa Oil and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Oil position performs unexpectedly, Microsoft Corp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Microsoft Corp will offset losses from the drop in Microsoft Corp's long position.The idea behind Africa Oil Corp and Microsoft Corp CDR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Microsoft Corp vs. Northview Residential REIT | Microsoft Corp vs. Winshear Gold Corp | Microsoft Corp vs. Wilmington Capital Management | Microsoft Corp vs. Till Capital |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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